Vitiating elements - Duress and undue influence

Learning Outcomes

This article outlines duress and undue influence as vitiating elements in contract law, including:

• Definitions and types of duress (physical duress, duress to goods, economic duress, and lawful act duress) and undue influence
• Distinctions between physical duress, duress to goods, economic duress, and lawful act duress
• Actual versus presumed undue influence and relationships giving rise to a presumption
• Legal tests for duress (illegitimate pressure, causation, and no practical alternative) and their application to factual scenarios, including contract variations induced by pressure
• The test for presumed undue influence (relationship of trust and confidence and a transaction calling for explanation) and the shifting and rebuttal of the burden of proof
• Third‑party undue influence in suretyships—constructive notice, the creditor’s “on inquiry” duties, and protective steps required by modern authority
• Rescission as the primary remedy and main bars (affirmation, delay, impossibility, and third‑party rights), including allocation of loss on rescission

SQE1 Syllabus

For SQE1, you are required to understand how duress and undue influence can affect the validity of a contract, with a focus on the following syllabus points:

• the definition and types of duress (physical, goods, economic, and lawful act duress)
• the elements required to establish duress (illegitimacy, causation, and no practical alternative)
• the distinction between actual and presumed undue influence
• the legal tests for undue influence, transactions calling for explanation, and the shifting burden of proof
• third‑party undue influence: constructive notice, when creditors are “on inquiry” and the steps required to protect the security
• the remedies available for contracts voidable due to duress or undue influence, and the limitations on rescission
• how to apply these principles to SQE1-style MCQs and practical scenarios

Test Your Knowledge

Attempt these questions before reading this article. If you find some difficult or cannot remember the answers, remember to look more closely at that area during your revision.

1. What are the essential elements required to establish economic duress in contract law?
2. In which types of relationships is undue influence presumed, and what must the defendant do to rebut this presumption?
3. What is the primary remedy for a contract entered into under duress or undue influence, and what are the main bars to this remedy?
4. How does the legal test for duress differ from that for undue influence?

Introduction

Contracts require genuine, voluntary consent. If a party’s consent is undermined by improper pressure or abuse of trust, the contract may be voidable. Duress and undue influence are two key vitiating elements that can render a contract unenforceable at the option of the victim. This article explains the definitions, legal tests, and remedies for duress and undue influence, with a focus on what you need to know for the SQE1 exam.

Duress

Duress arises where one party is forced into a contract by illegitimate pressure, depriving them of free consent. If duress is proven, the contract is voidable by the victim.

Key Term: duress
Illegitimate pressure (such as threats of harm or economic pressure) that induces a party to enter into a contract, making the contract voidable.

Types of Duress

Duress can take several forms:

• Physical duress: Threats of violence or actual harm to the person or their family.
• Duress to goods: Threats to damage or unlawfully withhold property. Modern law recognises this as capable of amounting to duress, notwithstanding older authority to the contrary.
• Economic duress: Unlawful or illegitimate financial pressure, often in commercial settings.

Key Term: economic duress
Illegitimate financial or commercial pressure that leaves the victim with no practical alternative but to agree, making the contract voidable.

Key Term: lawful act duress
A narrow category of duress where pressure involves threats to do something lawful, but in exceptional circumstances the pressure is nevertheless illegitimate (for example, bad‑faith exploitation of a known vulnerability).

Elements of Duress

To establish duress, the following must be shown:

1. Illegitimate pressure: The pressure applied must be improper. This often involves threats to breach contract, commit a tort, or a crime. In rare cases, lawful threats can be illegitimate (for example, bad‑faith threats to use legal rights in a way intended to coerce an unfair advantage).
2. Causation: The pressure must have induced the agreement. In economic duress, courts typically ask whether, but for the pressure, the claimant would have agreed. In physical duress, it suffices that the threats were a factor.
3. No practical alternative: The victim had no reasonable way to avoid the contract except by agreeing, assessed in a practical, commercial sense.

Courts assess illegitimacy and compulsion in the round. Helpful evidential pointers include whether the victim protested at the time, had a realistic alternative (e.g., injunction, substitute supplier, insurance), received independent advice, and whether they promptly sought to avoid the contract once the pressure ceased. “Hard bargaining” alone is not duress. Inequality of bargaining power is not sufficient by itself.

In commercial renegotiations, the threat of an unjustified breach is a strong indicator of illegitimacy. Where a variation is extracted by such pressure, the variation is voidable for duress even if, in form, the promisor received a “practical benefit”.

Worked Example 1.1

A supplier threatens to stop delivering essential parts to a manufacturer unless the manufacturer agrees to pay a higher price, knowing this would halt the manufacturer's business. The manufacturer reluctantly agrees. Is this contract voidable for duress?

Answer:
Yes, if the supplier’s threat was illegitimate (e.g., threatening to breach contract without justification), left the manufacturer with no practical alternative, and was a significant reason for agreeing, this is economic duress. The contract is voidable at the manufacturer’s option.

Lawful act duress

English law recognises a narrow category of “lawful act” duress. A threat to do something the law permits (e.g., withdraw credit, commence proceedings, or refuse future business) will not usually be illegitimate. It may amount to duress only in exceptional circumstances, such as where a party uses lawful means in bad faith to coerce consent to terms they know they are not entitled to, or otherwise unconscionably exploits a known vulnerability. Honest assertion of a genuinely believed legal position, even if forcefully pressed, will not ordinarily suffice.

Worked Example 1.2

A wholesaler delivers a replacement order after an initial consignment goes missing. It demands payment for both, threatens to withdraw credit facilities, and refuses future orders unless paid immediately for the missing stock. The wholesaler genuinely (though mistakenly) believes the contract puts the loss on the retailer. The retailer pays, then seeks to set aside the agreement for duress.

Answer:
Unlikely. Withdrawing credit and refusing future orders are lawful acts. Absent bad faith or other exceptional features, pressuring for payment based on an honestly held view of liability is hard bargaining, not illegitimate pressure. Lawful act duress is recognised only narrowly.

Duress to goods

Threats directed at property, such as wrongful detention or damage to compel agreement or payment, can constitute duress. The modern approach rejects the old view that only threats to the person would suffice. If the victim pays or agrees solely to regain unlawfully withheld goods, a court may set aside the agreement or permit recovery.

Duress and contract variations

Where a party uses illegitimate pressure to obtain a price increase or other variation, the variation is voidable for duress. This is so even if, on paper, the promisor obtained a “practical benefit” (such as avoiding delay damages) that would otherwise support consideration. The law will not enforce a bargain procured by coercion.

Exam Warning

In SQE1 questions, distinguish between hard commercial bargaining (which is lawful) and illegitimate threats. Not all pressure is duress—only improper threats or conduct.

Undue Influence

Undue influence occurs when one party abuses a position of trust or authority to obtain the other’s agreement, undermining their free will. This also makes the contract voidable.

Key Term: undue influence
Improper use of a position of trust or confidence to persuade another to enter into a contract, making the contract voidable.

Categories of Undue Influence

There are two main categories:

• Actual undue influence: Proven by direct evidence of improper pressure or manipulation.
• Presumed undue influence: Arises in certain relationships or where facts show trust and confidence, shifting the burden to the influencer to prove the transaction was entered into freely.

Key Term: actual undue influence
Direct evidence shows that improper influence was exerted to procure the contract.

Key Term: presumed undue influence
The law presumes influence in certain relationships or where trust and confidence is shown, unless rebutted by the influencer.

In actual undue influence, there is no need to prove the transaction was disadvantageous; it is enough to show improper pressure that overbore the claimant’s free choice. In presumed undue influence, the claimant must show (i) a relationship of trust and confidence and (ii) a transaction that calls for explanation (i.e., not readily explicable by ordinary motives). If those are shown, the burden shifts to the defendant to show the decision was the product of free and informed consent, often by evidence of competent, independent advice.

Relationships Where Influence Is Presumed

Certain relationships automatically give rise to a presumption of undue influence, including:

• Parent and child
• Guardian and ward
• Solicitor and client
• Doctor and patient
• Trustee and beneficiary
• Religious adviser and follower

Other relationships (e.g., husband and wife, adult child and parent, friends) may also give rise to a presumption if facts show trust and confidence. In modern law, undue influence is not confined to “categories”: the court looks at the real relationship between the parties.

Legal Test for Presumed Undue Influence

To establish presumed undue influence, the claimant must show:

1. A relationship of trust and confidence (either one of the established relationships, or proved on the facts).
2. A transaction that is not readily explained by ordinary motives (i.e., it calls for explanation or is manifestly disadvantageous).

If these are shown, the burden shifts to the defendant to prove the transaction was entered into freely, often by showing the victim received independent advice and understood the practical implications.

Worked Example 1.3

A bank manager arranges for an elderly client to guarantee her son’s business loan, without advising her to seek independent legal advice. The client trusts the manager and her son. The business fails, and the bank seeks to enforce the guarantee. Can the client set aside the guarantee for undue influence?

Answer:
Yes. The relationship of trust and confidence is present, and the transaction (guaranteeing a large loan) is not readily explained by ordinary motives. The bank failed to ensure independent advice was given, so the presumption of undue influence is not rebutted. The guarantee is voidable.

Third‑party undue influence (surety cases)

Where A (debtor) exerts undue influence over B (surety) to induce B to grant security to C (creditor), B can only set aside the security against C if C had actual or constructive notice of the undue influence. In domestic surety cases (e.g., a spouse or cohabitant charging a home to secure the other’s business debts), the creditor is generally “on inquiry” and must take reasonable steps to ensure the surety’s consent is properly informed and free.

Key Term: constructive notice
Notice imputed to a party who ought, in the circumstances, to have appreciated the risk of undue influence and taken reasonable steps to ensure a free and informed decision.

Reasonable steps usually include:

• Communicating directly with the surety to explain the nature and risks of the transaction, and that the creditor will rely on written confirmation of independent legal advice.
• Requiring the surety to receive competent, independent advice, privately and free from the influencer, with the adviser confirming to the creditor that the advice covered the nature, risks, and practical implications.
• Ensuring documents and information needed for informed advice are provided to the adviser.

If the creditor takes these steps, the security will generally be enforceable even if undue influence existed between A and B. If not, the security may be set aside.

Worked Example 1.4

A bank offers a business overdraft to H Ltd on condition that Ms Green (a director’s spouse) charges the family home. The bank writes to Ms Green explaining the risk and insists on independent legal advice. Ms Green meets a different firm’s solicitor privately; the solicitor confirms to the bank that the advice covered the nature and practical risks. The business fails and the bank seeks possession. Ms Green alleges undue influence by her spouse.

Answer:
The bank was on inquiry but took reasonable steps by requiring and receiving confirmation of competent, independent advice given privately. Absent other defects, the bank is unlikely to be fixed with constructive notice. The charge is likely enforceable.

Revision Tip

For SQE1, remember: in presumed undue influence, the burden of proof shifts to the influencer once a relationship of trust and a suspicious transaction are shown.

Remedies and Bars to Relief

If duress or undue influence is proven, the contract is voidable. The main remedy is rescission—setting aside the contract and restoring the parties to their pre-contract positions.

Key Term: rescission
The remedy that sets aside a voidable contract and restores the parties, as far as possible, to their original positions.

Rescission is an equitable remedy and may be barred if:

• The victim affirms the contract after the pressure or influence has ended (for example, by voluntary performance with knowledge of the facts and freedom from the pressure).
• There is undue delay in seeking relief once the coercion has ceased and the victim is in a position to act.
• Restitution is impossible (e.g., the subject matter cannot be returned in substance, or title has legitimately passed).
• Third‑party rights have intervened (e.g., the property has been sold to a bona fide purchaser for value without notice).

Key Term: affirmation
A voluntary election to continue with a contract after the vitiating factor has ceased, with knowledge of the relevant facts; affirmation bars rescission.

Rescission aims to restore the parties to their original positions. In practice, this may involve equitable adjustment rather than strict restitution in kind. Where values have moved, courts can tailor orders to do substantial justice, often by sale and division or by accounting for benefits received.

Worked Example 1.5

After being pressured by her nephew, Mrs. Green transfers her house to him. She later seeks to rescind the transfer, but the nephew has already sold the house to an innocent third party. Can Mrs. Green recover her house?

Answer:
No. Although the contract was voidable for undue influence, rescission is barred because the house has been sold to a bona fide purchaser. Mrs. Green may have a claim for damages against her nephew, but cannot recover the house.

Worked Example 1.6

A shipbuilder demands a 10% price increase mid‑performance, threatening to stop work otherwise. The buyer agrees to avoid breach of its downstream charter. The ship is delivered, the buyer pays the extra, waits eight months, then seeks to rescind the variation for duress.

Answer:
Rescission is likely barred. Even if the variation was procured by economic duress, affirmation or delay after the pressure ceased can defeat rescission. Prompt objection and action are needed once the compulsion ends.

Distinguishing Duress and Undue Influence

The concepts overlap but are distinct in focus. Duress targets coercion—pressure that leaves no practical alternative and is illegitimate. It is common in commercial renegotiations (e.g., threats to breach or withhold performance). Undue influence targets the misuse of influence—whether through overt pressure (actual undue influence) or by taking unfair advantage of a relationship of trust and a transaction calling for explanation (presumed undue influence). Lawful act duress is recognised only narrowly; undue influence may apply to apparently “consensual” transactions within relationships of confidence even without threats.

Key Point Checklist

This article has covered the following key knowledge points:

• Duress is illegitimate pressure (physical, goods, or economic) that vitiates consent and makes a contract voidable.
• Economic duress requires illegitimate pressure, causation, and no practical alternative; helpful indicators include protest, alternatives, advice, and prompt avoidance.
• Lawful act duress exists only in exceptional cases; honest assertion of lawful rights is usually not illegitimate.
• Duress to goods is recognised where wrongful detention or threatened damage compels agreement or payment.
• Undue influence is improper use of trust or authority to procure a contract, also making it voidable.
• Actual undue influence is proven by direct evidence; presumed undue influence arises in certain relationships or where trust and confidence is shown and the transaction calls for explanation.
• In presumed undue influence, the burden shifts to the influencer to show the decision was freely made, typically by proving competent independent advice.
• In third‑party cases, creditors can be fixed with constructive notice of undue influence and are “on inquiry” in domestic suretyships unless they take reasonable protective steps.
• The main remedy for duress or undue influence is rescission, but this may be barred by affirmation, delay, impossibility, or third‑party rights.

Key Terms and Concepts

• duress
• economic duress
• lawful act duress
• undue influence
• actual undue influence
• presumed undue influence
• constructive notice
• affirmation
• rescission